Nov. 14 (Bloomberg) -- President Barack Obama’s push to
expand an Asia-Pacific trade accord gained momentum at a summit
in Honolulu with agreements from Japan and Canada to join what
would be the largest American trade deal.

Obama said nine Asia-Pacific nations aim to reach a Trans-Pacific Partnership accord within a year in what would be the
biggest U.S. pact since the 1994 North American Free Trade
Agreement. Japanese leader Yoshihiko Noda and Canadian premier
Stephen Harper told the Asia Pacific Economic Cooperation summit
they will join the talks, which may help the U.S. regain
influence lost to China in a region that’s leading global growth.

Expanding the accord to add the world’s third and 10th-biggest economies may face political hurdles as leaders fight
protectionism at home. Noda faces domestic opposition to the
prospect of reducing a 778 percent tariff on rice, and delayed
his announcement a day to placate members of his own party.

“Countries that want free trade are looking for a way
forward, especially with Asia where the growth is,” said Tai Hui,
head of Southeast Asian economic research at Standard Chartered
Plc in Singapore. “This is a positive gesture against
protectionism. The sticky issues will be agriculture and labor-intensive industries.”

The sensitivity of the issue was highlighted by a rift over
what Noda told Obama in a Nov. 12 meeting. Japan denied a White
House account that Noda told the president he is willing to
negotiate all his country’s goods and services at the TPP.

‘Very Difficult’

“This is really about Japan and the U.S. and what the
future shape of Asia-Pacific trade will look like,” said Jun
Okumura, a former Japanese trade ministry official and a
consultant at the Eurasia Group in Tokyo. “It’s going to be a
very difficult negotiation.”

Speaking at APEC on Nov. 12, Malaysian Prime Minister Najib
Razak said the nine countries are setting July as a target for
an agreement, while a U.S. official said there is “no firm
deadline.” Negotiators will meet in early December and schedule
more discussions then, the leaders said in a statement.

“The Asia Pacific region is absolutely critical to
America’s economic growth, we consider it a top priority,” Obama
said yesterday at the summit. He told business leaders the day
before that TPP countries are “trying to create a high-level
trade agreement that could potentially be a model not just for
countries in the Pacific region but for the world generally.”

Asia’s growth has boosted earnings for its companies and
led to stock market gains that have beaten U.S. equities. The
MSCI Asia Pacific Index of stocks has outperformed the Dow Jones
Industrial Average seven of the past nine years through 2010.

‘Easily Meet’

Harper yesterday said his country is interested in joining
the talks and “can easily meet” the criteria to do so. U.S.
Trade Representative Ron Kirk said Mexico also wants to
participate.

Noda faces opposition within his Democratic Party of Japan
that a free trade agreement would damage the country’s
agriculture industry, which accounts for about one percent of
the economy. Failure to join may hinder Japanese companies such
as Mitsubishi Corp. and Toyota Motor Corp. in competing abroad.

After the White House released an account of the bilateral
summit saying Obama welcomed Noda’s statement “that he would
put all goods, as well as services, on the negotiating table,”
Japan’s Ministry of Foreign Affairs put out a statement saying
“Prime Minister Noda never said this” during the meeting.

Market Access

The current talks involve Australia, Chile, Peru and
Singapore, all of which already have separate free-trade
agreements with the U.S., as well as Malaysia, New Zealand,
Vietnam and Brunei. In addition to tackling traditional trade
issues such as tariffs and market access, negotiators at the
talks are seeking restrictions on government-owned companies and
stricter protections for patents and copyrights.

Some nations are seeking their own free-trade agreements as
the World Trade Organization’s Doha round of global talks
remains unfinished after a decade.

“A one-year timeline is a bit tight but given the impetus
of a weak global economy, it can be done if there is political
will,” said Irvin Seah, an economist at DBS Group Holdings Ltd
in Singapore. “The Doha round has been impeded by layers and
layers of bureaucracy and political issues. The TPP will be a
boost for trade.”

Two-way trade between the U.S. and the eight nations in the
TPP totaled $171 billion last year, compared with $457 billion
with China, $181 billion with Japan and $88 billion with South
Korea, according to the U.S. Commerce Department. Taken together,
the eight member economies would be America’s fifth largest
trading partner, Obama said.

Some Impetus

“An APEC agreement on broad outlines may not signify
much,” Razeen Sally, director of the Brussels-based European
Center for International Political Economy, said by telephone.
“It might provide some kind of impetus to the negotiations, but
there’s still a long way to go given how disparate the
membership is.”

Thomas Donohue, president and chief executive officer of
the U.S. Chamber of Commerce, the nation’s largest business
lobbying group, said in an e-mailed statement that while the
announcement is welcome, “the Chamber urges further substantial
progress as quickly as possible.”

In Malaysia, reluctance to change policies that give
preferential treatment for some state contracts to ethnic Malays
and indigenous people were among issues that led to a previous
breakdown in negotiations with the U.S. on a free trade pact.

‘Flexible’

“There is a need to be flexible in our approach and to be
realistic in terms of what can be achieved and accepted, or the
buy-in by our local constituencies,” Najib said on Nov. 12,
referring to the TPP nations. “The question of sensitivity
varies from country to country.”

The U.S.-South Korea free trade pact, initially agreed on
by presidents George W. Bush and Roh Moo Hyun more than four
years ago, was delayed as their successors Obama and Lee Myung
Bak sought wide domestic support for the deal. While Obama
signed the agreement into law on Oct. 21 after Congress passed
it earlier that month, South Korea’s main opposition Democratic
Party has stalled a vote on the bill since June.

China, the world’s second largest economy, has not received
an invitation to join discussions on the TPP and would
“seriously study” such a request, Assistant Commerce Minister
Yu Jianhua said Nov. 11. Kirk said no nation needed an
invitation as it is not a “closed clubhouse.”